Tennessee Mortgage Rates

Living in Tennessee

Whether you’re interested in Nashville’s bustling nightlife and country music scene or the calm morning mists over the Great Smoky Mountains, Tennessee has a little something for everyone. With a population of more than 6.7 million, it’s the 16th-largest state in the U.S., and it offers homebuyers the opportunity to make a home in busy cities and secluded rural areas alike.

While the number of completed home sales dropped by about 6.7% from the first quarter of 2018 to the first quarter of 2019, according to local real estate trade organization Tennessee REALTORS®, home prices are on the rise in the Volunteer State. The median home price was $230,000 in Tennessee as of the end of the first quarter of 2019, up from $224,500 the year prior — a 2.4% increase.

That overall upward trend holds true in Nashville, the state’s capital and most populous city. Homes for sale in the Nashville metro area stayed on the market for an average of 37 days in April 2019, up from 32 days in April 2018. This indicates a slight market improvement for buyers as homes remain on the market for longer and inventories rise. In April of this year, 11,627 homes remained on the market, up from 8,876 in April 2018. This gives buyers more choice in their search, with more homes listed and available for viewings.

The rules and costs of buying a home in Tennessee

Each state has its own set of rules for homebuyers and sellers alike. Tennessee is no different. Here are a few homebuyer and seller laws to keep in mind during your home search.

Home seller and buyer laws

What must sellers disclose? Tennessee state law requires home sellers to disclose any defects in the property for sale. This includes environmental hazards, issues with plumbing or electricity, previous remodeling work and past fire damage, as well as any knowledge the seller may have of defects in the roof, basement, foundation or doors. However, if a buyer and seller come to their own agreement, Tennessee allows sellers to forego the disclosure form to sell the house “as is.”

How does foreclosure work? Upon failure to pay a mortgage, lenders may choose to foreclose on a home. During the foreclosure process, some states require lenders to take the foreclosure process through the court system. These states are known as judicial states. Other states follow a non-judicial process, meaning that the foreclosure can proceed without a lender filing suit in court to begin foreclosure. Tennessee allows for both judicial and non-judicial foreclosures.

How is property divided in divorce? In what are known as “community property states,” joint assets such as income and real estate holdings are divided equally (50/50) during divorce proceedings. However, Tennessee is not one of these states. Rather, it is an “equitable distribution” state. In Tennessee, if a divorcing couple cannot come to full agreement on the division of all assets, a judge will do so, making a decision based on each party’s earnings and needs.

Does a lawyer need to be present during a home closing? Some states, referred to as “attorney states,” require a lawyer be present during a home closing. Others, called “escrow states,” do not mandate the presence of an attorney during these proceedings. Tennessee falls into the latter camp: it does not specifically require an attorney to attend proceedings; rather, buyers and sellers can work through an escrow agent during the homebuying process.

Taxes

Real estate transfer taxes: Upon closing, some states, including Tennessee, will impose a transfer tax. This tax typically is determined based on the total value of a property, and mortgage lenders are mandated to disclose the exact amount to any potential buyers. In Tennessee, buyers should prepare to pay a transfer tax rate of 0.37%, or $0.37 for every $100 in home value.

Property tax exemptions: Some homeowners in Tennessee may be eligible for property tax exemptions. These individuals include low-income seniors, homeowners with disabilities, veterans with disabilities or veterans’ surviving spouses, all of whom may qualify for tax relief through the Tennessee state government.

Typical property taxes: Homebuyers should always take property tax rates into account before deciding on a property. Depending on the location of the home, these property taxes can add up to significant costs each year. Tennessee has the 10th-lowest median property tax rate in the U.S., with a median statewide property tax rate of 0.68%. However, these rates can vary significantly by county and metropolitan area, so it’s important for homeowners to check with county governments to make sure they understand property tax laws in their area.

Conforming loan limits

For a single-family home, much of Tennessee has a maximum conforming loan limit of $484,350. Those in more expensive areas of Tennessee, such as Davidson County, where Nashville is located, may be eligible to borrow up to a maximum of $534,750.

Conforming loans are mortgages that follow guidelines set forth by Fannie Mae and Freddie Mac. These government-backed entities set national loan limits each year, as well as individual maximums by county or municipality. These are known as conforming loan limits — the maximum amount an individual may borrow for a mortgage loan, limiting the size of the loan.

Programs for homebuyers in Tennessee

Tennessee offers a range of homebuyer assistance programs throughout the state, which can make it easier for individuals to achieve their dream of homeownership. Here are a few of those programs.

Great Choice Home Loan

The Great Choice Home Loan program was created by the Tennessee Housing Development Agency to help Tennesseans with moderate incomes.

  • 30-year, fixed-rate home loans
  • Option to borrow up to 96.5% of a home’s cost
  • Insured by USDA-RD or FHA
  • For qualifying borrowers, option of financial assistance to cover downpayment and closing costs

Who qualifies:

Those who qualify for Great Choice Home Loans include first-time homebuyers, or those who have not owned a home in the prior three years and are buying in certain counties. Borrowers must meet the following requirements:

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Homeownership for the Brave

Homeownership for the Brave is a type of Great Choice Home Loan that is specifically designed for members of the military, including active-duty members, veterans, National Guard members, reservists and military spouses.

  • Offers all of the benefits of the Great Choice Home Loan program (see above)
  • VA-backed loans up to 100% of the home’s purchase price
  • For qualifying borrowers, additional financial assistance including down payment and closing costs

Who qualifies:

To qualify for this loan, borrowers must meet the mortgage qualification requirements for a Great Choice Home Loan (see above). Additionally, they must meet the following requirements:

  • Must be a member of the military. This includes active-duty military including the National Guard, honorably discharged veterans and reservists. Military spouses and surviving spouses may also qualify.
  • If a reservist, must have served at least 180 days active duty.

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STEP IN

STEP IN, or State of Tennessee Employee Partnership Initiative, is an educational opportunity for state employees.

  • Reduced-cost online homebuyer education courses ($25 instead of $99) for any state employee
  • Includes a 60-minute, personalized session with a certified instructor
  • Offers information about financial assistance, home loans, money management and property protection and maintenance

Who qualifies:

Borrowers must meet the following requirements:

  • Must be current employees of the state of Tennessee.

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Rate shopping tips

Buying a home — including the process of shopping for a mortgage rate — can be overwhelming. Here are a few tips to help you find the best mortgage rate in Tennessee.

Contact at least three lenders on the same day

If you’ve been watching the market, you’ll have noticed that mortgage rates change on a daily basis. They also vary by lender, which is why it’s important to contact at least three lenders when you’re shopping for a mortgage. Make sure to reach out to these three lenders on the same day so that you can get an accurate comparison between rates, as they can vary widely from day to day and lender to lender.

Doing so over a short period of time will also help protect your credit, as credit bureaus will recognize you’re shopping for a home loan and will not penalize your credit score. It’s best to submit all queries within a 30-day period to protect your credit.

Give each lender the same information

Submit the same financial information to each potential lender. By doing so, you can get an accurate representation of what mortgage rates the lender will offer you as a borrower. Compile documents such as bank statements and 401(k) retirement statements and submit that same information to each lender on the same day.

Add up all the lender fees to confirm the costs

Make sure to add up all the lender fees before you commit to a lender. Lenders typically charge processing fees for loan applications, as well as attorney fees, recording fees and closing costs. These charges vary by lender, so make sure to take all of these costs into account before locking in with a financial institution.

Know when to lock in your rate

When you’ve found the right mortgage rate with the right lender, it’s time to talk to your financial institution about locking in that rate. Once you do so, your mortgage rate won’t shift for a set period of time despite any market fluctuations that may occur. Keep in mind that this applies even if market rates drop, meaning you won’t be able to adopt a more favorable rate.

Most lenders offer rate lock periods ranging from 30 to 60 days, during which time a borrower will be required to close on the home to keep their rate locked in.

The information in this article is accurate as of the date of publishing.